CalAtlantic Group, Inc., Arlington, Va. (NYSE: CAA) on Thursday after market close reported net income of $99.0 million, or $0.75 per diluted share, for the second quarter ended June 30, 2017. The gain compares with net income of $112.8 million, or $0.83 per diluted share for the second quarter ended June 30, 2017. Analysts were expecting a gain of $0.78.
The earnings miss was due in part to $406.1 million of land purchases and development costs, compared to $394.8 million in the prior-year quarter.
Revenue from home sales for the 2017 second quarter increased 4% to $1.6 billion, as compared to the 2016 second quarter, resulting from a 5% increase in deliveries to 3,653 homes, partially offset by a 1% decrease in the company’s average home price to $444,000. The decrease in average home price was primarily driven by a 5% decrease in the West region, attributable to a shift in product mix.
Net new orders for the 2017 second quarter were up 4% from the 2016 second quarter, to 4,078 homes, with the dollar value of these orders up 7%. The monthly sales absorption rate was 2.4 per community for the 2017 second quarter, up 6% compared to the 2016 second quarter and down 4% from the 2017 first quarter. The cancellation rate for the 2017 second quarter was 14%, down compared to 15% for the 2016 second quarter and up slightly from 13% for the 2017 first quarter.
The dollar value of homes in backlog increased 4% to $3.6 billion, or 7,534 homes, compared to $3.4 billion, or 7,456, homes, for the 2016 second quarter, and increased 9% compared to $3.3 billion, or 7,109 homes, for the 2017 first quarter. The increase in year-over-year backlog value was driven by the 3% increase in the average home price in our backlog, to $473,000, and a 1% increase in units in backlog. As of June 30, 2017, the average gross margin of the 7,534 total homes in backlog was 20.8%, up 40 basis points compared to the total homes in backlog as of March 31, 2017.
The Company achieved gross margin from homes sales of 20.0% for the 2017 second quarter. CAA said the 2017 gross margin was negatively impacted by a shift in product mix and an increase in direct construction costs per home.
Selling, general and administrative expenses for the 2017 second quarter were $174.0 million, or 10.7%, as compared to $165.7 million, or 10.6%, for the 2016 second quarter. This 10 basis point increase was primarily the result of an increase in co-broker commissions.
During the 2017 second quarter, CAA purchased $262.4 million of land, consisting of 3,576 home sites, of which 33% (based on home sites) is located in the North region, 24% in the Southeast region, 11% in the Southwest region, and 32% in the West region. As of June 30, 2017, CAA owned or controlled 67,622 homesites, of which 46,788 were owned and actively selling or under development, 16,502 were controlled or under option, and the remaining 4,332 home sites were held for future development or for sale.
The Company ended the quarter with $823.1 million of available liquidity, including $167.8 million of unrestricted home building cash and $655.3 million available to borrow under its $750 million revolving credit facility. The Company’s home building debt to book capitalization as of June 30, 2017 and 2016 was 47.0% and 47.9%, respectively, and adjusted net home building debt to adjusted book capitalization was 45.7%* and 45.9%*, respectively.
“The second quarter was a productive one for the Company,” said Larry Nicholson, President and Chief Executive Officer of CalAtlantic Group, Inc. “In addition to our solid operating results, I am pleased with the significant progress we made with our growth initiative, expanding into the robust Seattle and Salt Lake City markets. Our entry into these strong “top 20″ markets offer us great growth and earnings opportunities going forward in sustainable, long-term markets.”
